June 22 (Bloomberg) -- A tea shortage in India may worsen as pest attacks damage plantations, lowering output and boosting prices, according to the world’s biggest tea-growing company.

Output in India, the top grower after China, may be less than last year’s 979 million kilograms after excess rain hurt tea shrubs in northeast states, which account for more than 70 percent of production, Aditya Khaitan, managing director, of McLeod Russel India Ltd., said in an interview today.

Reduced supplies may increase costs for companies including Unilever Plc and Tata Tea Ltd., owner of Tetley brands, and lift earnings at producers McLeod and Jayshree Tea & Industries Ltd. Prices reached a record at the world’s biggest auction centers last year after dry weather in Kenya and Sri Lanka cut output.

“It may be a good time to get into tea stocks for short- term gains as prices of good quality tea will start to inch up now,” said Anup Ranadive, an analyst with Tower Capital & Securities Ltd. “Last year it was drought that pushed up prices and this year its rain.”

Mcleod’s shares rose 2.6 percent to 194.75 rupees in Mumbai, the highest price since May 31. The stock has slumped 27 percent this year, after surging more than five times in 2009. Jayshree shares jumped 10.9 percent to 274.75 rupees, the biggest one-day gain since Aug. 21. Harrisons Malayalam Ltd. gained 4.4 percent to 123.1 rupees, a one-month high.

A smaller harvest may increase the domestic shortage by 25 percent to as much as 75 million kilograms by the end of 2010, Khaitan said. A 100 percent tax on imports curbs supplies to the market where demand is growing at 3.5 percent annually, he said.

‘Positive Trend’

“The market will feel the shortage in the coming months and the trend is looking positive for prices,” he said. “We’ve seen the high point of production and low point of prices.”

The average tea price was $2.43 per kilogram at the weekly auction held in Kenya’s port city of Mombasa on June 14 and 15, 18 percent more than the $2.06 per kilogram a week earlier, African Tea Brokers Ltd. said June 18.

In India, prices have risen by 15 rupees to 20 rupees a kilogram from a year ago as producers cover their future needs by purchasing at auctions, Khaitan said. Overseas sales may fall by 10 million kilograms to 15 million kilograms from last year’s 191 million kilograms as local demand and prices gain, he said.

Production in the four months through April has risen 12 percent to 162.3 million kilograms and the trend will reverse in the coming months, Khaitan said.

“Whatever increase we had until the end of April has been nullified because of the rain and pest attacks,” he said. “We are in fact going to be way down.”

June 30 (Bloomberg) -- Tea production in Kenya, the world’s biggest exporter of black tea, slowed in recent weeks because of rising temperatures in the country’s main growing areas, the Tea Board of Kenya said.

“The slowdown is expected to last for about three months,” Sicily Kariuki, the board’s managing director, told reporters today in the capital, Nairobi.

Output will drop after rising 15 percent in the first half, Kariuki said, without providing detailed production figures. The East African country produced 139.3 million kilograms (307.1 million pounds) of the leaf in same period a year earlier, according to the board’s website.

Heavy downpours in Kenya during the March-to-May rainy season ended an almost two-year drought, which had cut agricultural production. In the first quarter, tea production surged 69 percent to 111.7 million kilograms, the board said in April.

Egypt is the biggest buyer of Kenya’s tea, followed by the U.K. and Afghanistan. The country plans to seek new markets in North America, Titus Kipyab, the tea board’s chairman, told reporters in Nairobi today.

“Over-concentration in five traditional markets continues to pose a risk, with over 75 percent of all tea exports being sold to Egypt, Pakistan, the U.K., Sudan and Afghanistan,” Kipyab said.

Kenya also plans to boost tea-growers’ earnings by branding the commodity, Kipyab said, without providing further details. As much as 94 percent of the tea produced in the country is exported in bulk, he said.

July 15 (Bloomberg) -- Tea production in India’s biggest growing region will decline this year because of pest attacks, driving prices higher, the state-run Tea Board of India said.

Output in Assam, which accounts for more than half of the country’s production, may drop 30 percent to 40 percent during the so-called second flush, Basudeb Banerjee, chairman of the board, said in a phone interview from Kolkata yesterday.

A smaller crop may widen a shortage in the world’s largest user of the beverage after China, and lift profits at producers McLeod Russel India Ltd., the world’s biggest, and Jayshree Tea & Industries Ltd. Prices at auctions in India’s northeast states have climbed as much as 15 rupees per kilogram (2.2 pounds) in the past two weeks and will likely stay firm, Banerjee said.

“Prices will sustain for the next one quarter or so,” Anup Ranadive, an analyst at Tower Capital & Securities Ltd., said in Mumbai. “Most tea producers will have strong gains in profit in the fiscal second quarter” ending Sept. 30.

McLeod’s shares advanced as much as 3.3 percent to 220.50 rupees in Mumbai. The stock, which surged more than five times in 2009, may reach 250 rupees, said Ranadive, who has a “buy” recommendation on the company. Jayshree Tea gained as much as 4 percent to 301.4 rupees, the highest in more than three months. Harrisons Malayalam Ltd. gained 3 percent to 136 rupees.

Production in Assam fell 11 percent in May to 28.5 million kilograms from a year earlier, data from the board showed. The second flush pickings are typically the best-quality leaves that fetch a premium from buyers overseas.

‘Excess Rain’

“There’s been excess rainfall in June, leading to a pest attack,” the board’s Banerjee said. “This will have an impact on production even in July and August.”

India’s output will be less than 979 million kilograms last year, Banerjee said. Production in the five months ended May 31 rose 9 percent to 234.9 million kilograms, the board said.

A smaller harvest may increase the domestic shortage by 25 percent to as much as 75 million kilograms by the end of 2010, Aditya Khaitan, managing director of McLeod Russel, said in June. A 100 percent tax on imports curbs supplies to the market where demand is growing at 3.5 percent annually, he said.

Shipments of premium tea to buyers in Europe and the U.S. may decline this year, Banerjee said. Exports of all grades in the five months ended May rose to 71.2 million kilograms from 59.6 million kilograms a year earlier, the board said.

A rebound in production in Kenya and Sri Lanka, the biggest exporters, may keep local prices from rallying, Banerjee said.

“Production is pretty much at last year’s level in countries like Sri Lanka and Kenya,” he said. “So there may not be a huge increase in prices.”

The average price of African tea declined to $2.12 per kilogram (2.2 pounds) at the world’s biggest auction in Kenya’s port city of Mombasa. The average price dropped from $2.16 at the previous sale, Tea Brokers East Africa Ltd., said in an e- mailed report from Mombasa yesterday.

Oct. 8 (Bloomberg) -- Tea prices in India, the biggest grower after China, may climb as labor costs rise and crop damage from pest attacks widens a production deficit, according to the state-run Tea Board of India.

An wage increase at gardens in West Bengal from April will force McLeod Russel India Ltd., the largest tea plantation owner, and rivals to lift prices, Tea Board chairman Basudeb Banerjee said in a phone interview yesterday. The eastern state accounts for 20 percent of the nation’s output.

Higher prices may push up costs for companies including Unilever Plc and Tata Global Beverages Ltd., owner of Tetley brands, and boost profits at Indian growers including McLeod and Jayshree Tea & Industries Ltd. The nation’s output fell for three straight months through August as pests damaged plants in Assam, which accounts for more than half the country’s crop.

“The production shortfall this year in India is going to widen the inventory pipeline and that will ensure prices stay high,” said Aditya Khaitan, McLeod’s managing director.

The supply deficit may widen to as much as 100 million kilos by March and April, from 60 million kilos this year, he said, repeating an estimate made last month. Output this year may be 10 million to 15 million kilos lower than last year’s 979 million kilos, Tea Board’s Banerjee said.

Prices have climbed by 15 rupees to 20 rupees a kilo to 150 rupees to 180 rupees in north India, said Khaitan.

A rebound in output in Kenya, the biggest producer of black tea, and Sri Lanka, the second-biggest supplier, won’t ease the Indian shortage, as the Asian nation imposes a 100 percent tax on imports, Khaitan said.

Kenyan Output

Kenya’s output may jump 11 percent this year to 350 million kilos, from 314 million kilos last year, the nation’s tea board said Sept. 30. Sri Lanka’s harvest increased 21 percent to 221.3 million kilograms from January to September, data from the nation’s tea board show.

India produced 584.9 million kilos in the January-to-August period, 1.7 percent lower than a year ago, the tea board said yesterday. Shipments advanced 8 percent to 124.1 million kilos from 114.7 million a year earlier, the board said.

Exports this year may be little changed from last year’s 198 million kilos, Banerjee said.

KOLKATA: The year 2010 has been a bad year for the Darjeeling tea industry. Production is set to be lower this year by at least 10% which has impacted supplies to export markets of Japan, Germany and the UK. The Darjeeling tea industry, which reported a 12% lower crop between January and August this year, may end up with a production of less than 8 million kg.

Talking to ET, Sanjay Bansal, chairman of Darjeeling Tea Association , said: “The crop was affected during the first flush due to drought. Even the second-flush production was affected due to erratic weather conditions. At times, it has been difficult for the exporters to meet the export commitment due to the shortage. It has been a bad year for the industry. However, the only silver lining was a steady domestic demand. Surprisingly, the domestic demand for the Darjeeling tea has gone up by 30% which generally doesn’t happen. But the domestic price cannot match the international prices that Darjeeling planters fetch.”

Mr Bansal, whose Ambootia Group is the second largest Darjeeling tea company in the country, said this year’s would be one of the poorest crops in the last 40 years. The problem was triggered by a severe drought which started in October 2009 and continued till April 2010, when leaves dropped. As a result of this, the first-flush tea, which comes around mid-May and contributes about 20% of the crop, was down by about 35%.

Mr Ashok Lohia, chairman of Chamong Tee , said: “Even though prices firmed up due to a shortfall, producers failed to benefit because of low production. The cash flow has not improved for most companies compared to FY10. However, the surge in domestic demand has brought much cheer to us. We are happy that there are takers for Darjeeling tea, which is a bit pricey, in the domestic market as well. We can leverage this trend next year as well.” There are 87 tea estates in Darjeeling, all of which are running now. However, bad weather was not the only reason behind the crop loss. Shifting to organic methods of production has also led to a less output. During 2010, as many as 35 Darjeeling gardens changed hands with some crops being lost in the transformation.